Problem 11-54 Cost Allocation: Step and Reciprocal Methods (LO 11-3,4) Great Eas

Question

Problem 11-54 Cost Allocation: Step and Reciprocal Methods (LO 11-3,4) Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded Using Department Supplying Department Processing Administration Maintenance Direct cost Processing Administration Maintenance Branches Electronic 0 0 10% 60 0 20% 0 0 0 $250,000 10% 60% 20% 40% 40% 50% $83,000 $530,000 $4,300,000 $1,650,000 Required: Allocate the service department costs to the two operating departments using the reciprocal method Allocated to: Costs Processing Administration Branches Electronic Maintenance Processing Administration Total

Explanation / Answer

Allocated to: Costs Processing Administration Branches Electronic Maintenance 250000 25000 50000 50000 125000 Processing 83000 41500 8300 33200 Administration 530000 318000 212000 Total 863,000 66,500 50,000 $376,300 $370,200

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